Seniors Blast USF, Urge Reverse Auctions
Telecom customers nationwide are getting stuck for a fortune needlessly subsidizing rural telephone companies via the Universal Service Fund (USF), a consumer group charged Wed. The govt. would spend less giving satellite or wireless phones to rural residents otherwise without service than it does “enriching” rural telecoms, said a representative of the Seniors Coalition in a call-in news conference.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
USF benefits are “largely distributed to shareholders of rural telephone companies, not consumers,” George Mason U. Prof Thomas Hazlett said in a report the group released. The program’s subsidies “encourage widespread inefficiency and block adoption of advanced technologies such as wireless, satellite and Internet-based services that could provide superior voice and data links at a fraction of the cost of traditional fixed-line networks,” said Hazlett, who participated in the news conference.
A better route would be a reverse auction with low-bid carriers competing to serve rural areas, said Hazlett and Seniors Coalition national spokesperson Flora Green. That would “make sure that those Americans who really need USF help get it with the best available technology and at the lowest possible cost to taxpayers,” said Green. FCC Chmn. Martin has indicated an interest in the idea, but the agency hasn’t acted in it. Whether or not a reverse auction approach is adopted, “the Fund should be capped and then reviewed from top to bottom to squeeze out all the billions of dollars of waste and fraud going on today,” said Green.
Among Hazlett’s findings: (1) Many rural LECs incur more than $500 per line in annual administrative cost “unrelated to the higher capital expenditures often required in sparsely populated areas.” (2) “Pentagon-style accounting under USF encourages waste and abuse by rural telephone companies.” (3) Consumers could save at least $1 billion yearly by replacing the program with one giving away retail cellular or satellite phone service. (4) “Rural telephone companies are in business to rake in USF subsidies, not to make money from customers.” Of the average rural company’s revenue stream, 30% comes from federal and state subsidies, with another 26% from access charges, Hazlett said.
In April, the Seniors Coalition said about 66% of older Americans it surveyed think it would be “unfair” to switch USF from a revenue basis to a flat fee such as one based on phone numbers; 83% oppose expanding the program to fund broadband services if that means seniors pay more. The survey polled 860 people. Asked how the coalition became so involved in the issue, Green said it’s among its concerns because it could hurt older Americans.
The National Telecom Co-op Assn. said without universal service rural seniors would face pay as much as $100 more per month. The law mandates rural access to communications services at rates comparable to those in urban areas, and the USF was designed to assure that, NTCA said in a statement. Alternate technologies cited in the Hazlett study, such as wireless and broadband, ride on the rural companies’ networks, which would “cease to function without proper maintenance.”